Editor’s note: Leadership transition/succession is one of the most important issues facing firms today. This article is the first of a two-part series on succession planning.

Setting the Stage 2009-2013

Why change leadership? 

The average architectural firm exists for only nine years. Economic downturns, the loss of key clients or a change of heart by the founders are the usual reasons cited for merging or closing a firm. For the firms that persevere, the most important factor for their longevity is effective leadership succession. This is even more important for a 160-year-old firm whose leaders want to be stewards of that legacy.

But that’s not why we started succession planning in 2009. There were three industry trends that brought succession to the forefront:

• Boomer bubble – The average age of our partners was in the mid-fifties; in fact, the ages of our eight executive committee members were all within five years of each other. It was clear that there was an issue to address.
• Scarcity of talent – Our industry had “lost” a generation in an economic downturn, and fewer graduate architects were interested in practice. Competition with employers outside of our industry for graduate engineers was an additional concern.
• Merger mania – We had actively searched for merger partners for several years and realized that the lack of a succession plan was often a motivator for a merger or sale. The next generation of talent in a firm is its future value; not the current leadership.

We concluded that developing talent in-house and instilling a culture of succession was the best way to ensure our future value to our clients. A detailed “depth chart” of key positions was created to identify current and potential candidates for those positions. We also evaluated the timing of their potential transition and leadership development. This subject was on every executive committee meeting agenda from that time forward. For the first time, the necessity of our own “transition” was openly recognized. At first, it was uncomfortable—it was like talking about your own mortality. In time, that discomfort faded as this type of discussion became the norm.

We had found the first requirement for a smooth succession: Transparency.

Getting Comfortable

New processes and experiences are stressful, so it is human nature to want to find out what others have done to ensure that you don’t make an avoidable mistake. Smith- GroupJJR has survived many changes in its long history, so looking at our own history of succession was a natural place to start. We found that the president or chairman had changed 11 times. Four died in office, four retired, and three were “removed.” The same process was never used twice, and none of the seven who retired or were removed remained with the firm. The “up and out” principle had applied for over a century!

In an informal poll of 40 peer firms, 75 percent of the firms were dealing with succession issues. Less than 5 percent had experienced leadership transitions more than once. Only two had used the same leadership succession process twice. It became obvious that there was no model that could be followed and that we had to design our own process for succession.

Researching other businesses, professional service organizations and A/E industry sources gave us some principles of succession that were applicable to our firm:

• Start early. It takes years to plan and implement a smooth transition. Unsuccessful transitions usually started too late.
• Transitions are highly customized to a firm and individuals but the same process must be fairly applied to all partners at all levels.
• You will lose people if you are not transparent and inclusive in the process.
• While outgoing leaders are invaluable to the succession process, they should not select their successors. Unconscious bias will move them toward candidates like themselves.
• Leadership must decide early whether to go outside for candidates or stay inhouse. The process is entirely different for each approach.
• The future leadership needs of the firm will be different than they are today. Don’t assume the current roles and responsibilities are the same or you will miss an opportunity to accelerate your firm’s evolution.

Planning for Change

Our succession philosophy started with planning for and actively managing the transfer of equity across generations. We changed our policy to require a sell-down of equity between the ages of 63 and 67. Without this change, there was no way to predict equity transfer and few opportunities for future leaders to move up. Most importantly, there was no culture of leadership transition. Our new policy documented the philosophy that senior leaders would start the succession process at the same time their financial stake in the firm starts diminishing. This change established the expectation that early in this divestment period, every leader would voluntarily relinquish the responsibilities and salary of a senior leader.

It took a year to research, plan and scope the transition process. Our executive and compensation committees had evolved over time and their focus had moved from hands-on management to more strategic functions. The change in leadership was an opportunity to update the functions and roles of these committees as well as our three corporate officers: the president/chief executive officer, chief operating officer and chairman of the board.

Some office director and practice leader positions had already been successfully transitioned, but the process and timing of the transition for our president/CEO would solidify the new succession philosophy. The president/CEO and COO agreed that they would transition together to allow their roles to be adjusted to meet future leadership needs. In the fall of 2013, it was agreed that June 2015 would be the formal transition for both executives. The chairman would begin the transition a year later when he turned 63.

We identified the second requirement for succession: A cultural expectation.

Designing a Process for SmithGroupJJR

In November 2013, a three-step succession process was shared with our board:

• Evaluate and define future corporate officer roles
• Document criteria for all corporate officer positions
• Identify candidates for newly defined positions

A board committee was formed to accomplish these three tasks. Internal candidates for the officer roles were appointed to the committee so they could have a voice in the outcome. We did not want to lose any key talent in the process so we made every attempt to eliminate the perception of winners and losers. Upon the board’s approval of the committee’s recommendations, a smaller nominating committee was formed of two non-candidates and the chairman. The president/ CEO, COO and HR director served in an active advisory (non-voting) role.

All functions and processes managed by the current corporate officers were documented in detail so that the new leadership team had a clear scope of their responsibilities. This document guided a nine-month “job-shadowing” process, whereby the new officers would be directly involved in the processes before they assumed full accountability.

Our post-election shadowing process was a rare feature of succession. Common tradition followed the up-and-out principle and assumed leaders could not return to practice after being corporate officers. Our strategy was to encourage senior leaders to stay with the firm, transition back to practice and share their valuable experience for the benefit of the firm.

The decision to initiate this leadership transition process and design a thoughtful and strategic plan were important steps forward for our executive team. By identifying the key principles of this process and sticking to them, we were able to develop a plan that was well positioned for success.

Keys to a Successful Transition

• Be transparent. Treat everyone equally.
• Make it cultural. Don’t let it become personal.
• No winners or losers. Let future leadership execute the plan.
• Invest in the plan. It will pay dividends with success.
• Be realistic. Succession takes time and effort.

In the second installment of this story, we’ll address the details of how we moved forward into the implementation phase of this process and share some of the lessons we learned along the way.

Carl Roehling, FAIA, is the former president/ CEO of SmithGroupJJR.

Troy Thompson, AIA, is managing partner of SmithGroupJJR.